PropTech & The Disruption of Real Estate

The wave of disruptive solutions using innovative technologies in sectors such as finance (FinTech and RegTech) recently entered a significant sector of the world economy: real estate. Through the transformation of this sector in an increasingly digitalized world, a new concept was born, bringing with it billion-dollar opportunities: PropTech. Let’s try to better grasp this sweeping market evolution.

Refreshing an old-fashioned industry

PropTech is a term used for startups that provide innovative technological solutions for the real estate market. By improving current economic models or integrating disruptive solutions, PropTech players reinvent dated methods still used in the real estate industry. Digital context and evolving lifestyle are also key to identifying areas for growth.

Solutions for a new paradigm: nomadism and the sharing economy

The first startups that emerged from PropTech were inspired by the digital nomads of younger generations and driven by the evolution of the sharing economy. This new style of consumption is reflected across society: new co-working and business centers are popping up everywhere; communal apartments are no longer exclusive to students but to all demographics (for example, families and the elderly); and house swaps are more and more common.

These existing activities are expanding their markets thanks to digital solutions, such as housing management software, cloud-based document management and the development of online community platforms that build trust through rating systems.

“Various technologies have arrived to disrupt the whole value chain in the real estate sector. Some of them are already tried-and-tested, including crowdfunding, building information modeling, blockchain, drones, predictive analysis, Internet of Things and 3D printing.”

The quest for optimization and better productivity

Various technologies have arrived to disrupt the whole value chain in the real estate sector. Some of them are already tried-and-tested, including crowdfunding, building information modeling, blockchain, drones, predictive analysis, Internet of Things and 3D printing. Startups are currently merging those technologies to forge business models that are likely to generate optimization and productivity.

No part of the real estate value chain is left untouched. This revolution can be split into five main segments: financing, construction, transaction, management and occupancy.

These disruptive trends and transformative economic models will have impacts beyond the PropTech sphere. Costs will be cut across the board: investor capital, construction work, intermediation and building management. This lighter financial load will finally open the door to quality improvements within the sector.

Today, the gap between supply and demand sways stakeholders to tolerate a quality of service that would be unacceptable elsewhere, namely in the industrial sector, which has long adhered to the zero fault concept.

“To foster the emergence of local PropTech startups with the potential to become unicorns, the development of PropTech incubators, investment funds and partnerships with local real-estate players are essential.”

PropTech: the future of Luxembourg?

Real estate activity used to be intrinsically linked to vacancies and the availability of property on the market. Small countries are therefore “penalized” due to a lower number of transactions compared to bigger countries.

Luxembourg, however, has the potential to become the tried-and-tested market for innovative real estate solutions that could be globally expanded. In terms of assets and quality, PropTech startups in Luxembourg can compete with other market players. To foster the emergence of local PropTech startups with the potential to become unicorns, the development of PropTech incubators, investment funds and partnerships with local real-estate players are essential.

This article was first published in the 8th issue of SILICON magazine. Be the first to read SILICON articles on paper before they’re posted online, plus read exclusive features and interviews that only appear in the print edition, by subscribing online.

Audrey Baverel, a consultant advising startups, has a strong track record in corporate financing and tax. In each issue of SILICON Magazine she clarifies a concept relevant to the industry and you, the readers.